As anyone who has ever sought insurance knows (hereinafter an “insurance seeker”), it can be a challenge to find an insurer who is willing to offer insurance at a reasonable premium and on reasonable terms. Although the verity of this statement is clear for insurance seekers who are a poor risk, it is also true, albeit less obviously so, for those insurance seekers who are a good risk. For example, although many insurers may endeavor to provide some types of insurance, few insurers provide more than a small subset of all of the types of insurance offered by all of the insurers. One insurer may offer only homeowner's insurance for single-family dwellings while another only offers flood insurance for apartment dwellers. Therefore, even an insurance seeker who is a good risk may waste its time approaching insurers who do not offer the insurance product the insurance seeker desires.
Furthermore, even if an insurance seeker finds an insurer who does offer the desired insurance product, the insurance seeker is unlikely to know if that insurer is offering the insurance at a competitive premium and on competitive terms. Typically, there are three ways that an insurance seeker can remedy this.
First, the insurance seeker can contact (e.g., in person, on the telephone, etc.) numerous insurers and inquire into their premiums and terms for a particular insurance product. In fact, many people do precisely this when seeking automobile insurance because it is well known that the premiums, terms, fees and underwriting standards of different insurers vary widely. Although it clearly pays to shop around, even the most stalwart are unlikely to contact more than a dozen insurers because of the time and effort involved.
Second, the insurance seeker can consult newspapers and other periodicals that publish premiums and terms for a variety of insurers. Such listings are, however, unlikely to be comprehensive and are likely to be out-of-date, particularly in times when premiums and terms are changing rapidly. Furthermore, published premiums are often misleading because they apply only to those insurance seekers who are the best risks.
One factor that accelerates the perishability of premiums in newspapers and periodicals concerns insurers who discover that their published premiums and terms are not competitive. Typically, those insurers immediately change their premiums and terms, but because of the latency in the publication and dissemination of newspapers and periodicals those changes are not immediately widely-known.
Third, the insurance seeker can contact an “independent” insurance agent who represents a plurality of insurers. The independent insurance agent is not, however, necessarily motivated to provide the insurance seeker with the least expensive insurance product at the best terms but rather the insurance product that garners the agent the largest commission.
Regardless, when an insurance seeker has satisfied itself that it has found an insurer who offers the desired insurance product at a competitive premium and at reasonable terms, the insurance seeker must thereafter expend an indeterminate amount of time and energy to learn if it qualifies for the desired insurance product from that insurer. And although an insurance seeker may satisfy itself that it has located an insurer with the best premium and terms, that does not mean that it has, in fact, done so. There could be other insurers, unknown to the insurance seeker, who offer better premiums and terms who would accept the insurance seeker as an acceptable risk.
Furthermore, the insurer may decide that the insurance seeker does not qualify for the desired insurance, or that the insurance seeker, because of poor health, accidents in the past or other high-risk factors, does not qualify for the best premiums and terms, which are what brought the insurance seeker to that insurer in the first place. In either case, the insurance seeker may have wasted its time in approaching the insurer or may not receive the premium and terms that were anticipated.
The end result is that it can be difficult for those seeking insurance to find an insurer that is willing to offer the insurance product that the insurance seeker desires at a competitive premium and on competitive terms.
Perhaps surprisingly, it is even more difficult for each insurer to find a satisfactory number of potential customers (i.e., insurance seekers who are interested in and qualify for the insurer's insurance products). In fact, some insurers spend hundreds of millions of dollars per year on advertising to entice insurance seekers to their door only to learn that many do not qualify for a particular insurance product under the insurer's underwriting standards. This is extremely problematic for insurers because the money they spend on advertising, 800-numbers, insurance agents and underwriters must be recouped from the gross receipts of those products that actually sell, which increases the insurer's costs, pushes it's premiums up, makes it less competitive in the marketplace, and hinders its ability to attract insurance seekers. In other words, a portion of the premiums paid by insureds goes to pay for the insurer's costs in advertising and culling out insurance seekers who are an unacceptable risk. Therefore, an insurer could offer an insurance seeker who is an acceptable risk a lower premium if the insurer had numerous insurance seekers knocking on its door, all of whom were acceptable risks. Furthermore, the insurer's profits could still rise if its costs of doing business decreased faster than its premiums did.
In summary, not only do insurance seekers have difficulty locating an insurer that offers the insurance product sought at competitive premiums and on competitive terms, but it is also difficult for insurers to find large numbers of insurance seekers who are acceptable risks without having to spend large sums of money on advertising and culling out the unacceptable.
Therefore, the need exists for a mechanism that enables an insurance seeker to quickly and easily find an insurer that offers the insurance product that it desires at competitive premiums and on competitive terms and that also provides insurers with large numbers of acceptable insurance seekers at a reasonable cost.